Workers using early payroll payments to meet shared expenses amid pandemic

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COVID-19 has caused a shift in how workers are using the DailyPay earned wage access (EWA) service by withdrawing more money to help out others and pay down debt.

DailyPay reported that as the pandemic has rippled through the economy, causing widespread job losses and financial difficulties, it’s experiencing shifts in the variety of ways hourly workers are using its EWA services. The company also reported that it is having longer-term engagements with its users and is seeing an uptick in employer demand for its services.

“Before COVID people were taking out money for individual reasons, such as to buy gas, groceries, etc.,” said Jeanniey Walden, chief innovation and marketing officer at DailyPay. “Since COVID began we’ve been seeing a significant number of people, maybe around 80% or so, take out money to help their entire household, such as helping a roommate who may have lost their job, to cover the monthly rent. We’ve also seen a slight increase in the amount withdrawn, by about 20%. People are taking out odd dollar amounts to fit a specific bill, which is a good thing because it indicates a need basis, unlike how an ATM is used.”The other trend that DailyPay has noticed is the lack of entertainment and spending opportunities facing its North American clientele, creating a renewed focus on fiscal responsibility.

“We have also been seeing a whole group of people using DailyPay that are not financially impacted by reduced hours and so on, to pull out money and use it to pay down high cost debt such as credit cards,” said Walden.

In an industry with many competitors — including startups such as AnyDay in the U.S. and Orka Pay Europe, as well as established companies such as Even and Wagestream raising new funding — DailyPay differs from the crowd on a few points.

First, Walden stated that DailyPay is an employer-based model, working directly with companies to offer the EWA service to their employees. Others in the industry, such as Earnin, are direct-to-consumer. By being employer-based it requires DailyPay to integrate with popular payroll systems. DailyPay reported it has an entire group focused on creating such integrations, which support solutions offered by ADP, Kronos and others.

Because the integration with human capital management (HCM) payroll systems is so crucial for the employer-based model, the demand has even convinced one HCM provider, Ceridian, to step into the EWA market with its own offering in May.

The second notable difference with DailyPay is that unlike many rivals, it allows employees to withdraw 100% of their earned, but not yet paid wages. Most competitors have dollar caps, such as $500, or percentage caps, typically 50%.

“We believe the employee should have access to 100% of their earned pay if they want it. If for some reason the employer wants a cap, we can put one in, but that’s not our standard operating procedure,” noted Walden.

DailyPay’s sole revenue stream is from the worker withdrawing their wages. Many other competitors such as Branch (with Mastercard) and PayActiv (with Visa) offer prepaid cards that generate an interchange revenue stream.

“We make money through the employee when they take out money,” Walden explained. “They pay us a $1.99 transaction fee for next day access using ACH, and it goes to whatever bank they designate; or it’s $2.99 if they take it out immediately. We do not charge businesses anything. We do not have a payroll card, so we can send funds to any card such as a Wisely Pay Visa debit card, as an example, that is offered by ADP.”

DailyPay stated that it has over 250 customers in North America, reaching a couple of million eligible employees. It serves companies such as Kroger, Tractor Supply and McDonald’s, and is also working with staffing services including Adecco Group.

“The ability for our associates to have access to their pay as they earn it has played an important role in supporting our essential workers," said Theresa Monti, vice president of Total Rewards at Kroger, in an emailed statement. "During the pandemic we have worked hard to ensure our team is healthy and safe, both personally and financially. We remain committed to support the overall well-being of our associates which includes our ExpressPay program, powered by DailyPay. DailyPay provides us the flexibility and control we need to create the best experiences for our associates.”

Changes in EWA user habits are not just being seen by DailyPay, as rival PayActiv just reported that 80% of its users are now using the instant pay option for EWA funds over ACH. PayActiv added the Visa Direct real-time payment option just over a year ago and most recently changed its business model to reflect the two withdrawal methods: paid real-time and free ACH. In a recent PaymentsSource podcast, PayActive CEO Safwan Shah explained why earned wage access (EWA) is suddenly a big deal.

DailyPay also offers employees and employers additional products that add value, especially in the recruiting and retention process. One notable product is the reward functionality that allows a manager to send an employee a spot bonus through DailyPay for doing a great job.

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